Verizon Communications Inc. (VZ) plans to finance its purchase of Vodafone Group Plc (VOD)’s stake in their mobile phone unit with an offering of as many as eight parts that may exceed Apple Inc.’s record issue in April.
Verizon may sell three-, five-, seven-, 10-, 20- and 30-year debt as soon as Sept. 11, a person with knowledge of the offering said. The portions due 2016 and 2018 may consist of fixed- and floating-rate debt, said the person, who asked not to be identified because terms aren’t set.
The phone company with $49.2 billion of bonds is seeking as much as $50 billion in notes for a $130 billion transaction to acquire full control of Verizon Wireless, the most profitable U.S. mobile carrier. The deal is being managed by Barclays Plc, Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley, New York-based Verizon said today in a regulatory filing that didn’t include the maturities for the issue.
The offering is poised to be the largest bond sale on record, potentially topping Apple’s $17 billion issue on April 30, according to data compiled by Bloomberg. This week’s initial sale may reach about $20 billion to $30 billion, mostly dominated in dollars, but also including euros, British pounds and possibly Japanese yen, Societe Generale SA analysts wrote in a report dated Sept. 8.
Verizon’s three-year fixed-rate notes may yield about 165 basis points more than similar-maturity Treasuries; the five-year debt may pay a spread of about 190 basis points; the seven-year securities may pay about 215 basis points; the 10-year debt may pay about 225 basis points; the 20-year notes may pay about 250 basis points; and the 30-year bonds may pay about 265, the person said.
The floating-rate notes due September 2016 may yield about 150 basis points more than the three-month London interbank offered rate and the five-year securities may pay about 175 over Libor, a borrowing benchmark, the person said. Libor was set today at 0.2559 percent. A basis point is 0.01 percentage point.
The debt is expected to be ranked Baa1 by Moody’s Investors Service and BBB+ at Standard & Poor’s, both three levels above junk, after the two ratings firms cut Verizon’s credit grade last week following the announcement of the transaction with Vodafone.
Yields on the Bank of America Merrill Lynch U.S. Telecommunications Index reached 4.16 percent on Sept. 6 from 3.88 percent at the end of August as investors anticipated the Verizon offering.
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